U.S. Airways reverses course as sector declines

PadraicCassidy

NEW YORK (MarketWatch) -- U.S. Airways Group shares gave up early gains to close in negative territory with the rest of the airline sector Thursday, after the No. 5 domestic carrier released stronger-than-expected first-quarter results but warned on costs.

The Amex Airline Index ($XAL) finished down 1.1% at 52.26 points. The broader Dow Jones Wilshire Airline Index gave up 2.3% to end at 1,271 points.

Shares of AMR Corp.
AMR, -3.26%
were among the hardest hit, down 4.6% at $27.69. JetBlue Airways
JBLU, -1.86%
Mesa Air Group
MESA
and ExpressJet Holdings
XJT
were the only advancers, up about 1% each.

U.S. Airways Group Inc.'s
LCC, -0.20%
first-quarter net income rose to $66 million, or 70 cents a share, from $65 million, or 76 cents, in the year-earlier period. Fewer shares were outstanding in the 2006 first quarter.

U.S. Airways said it gained $32 million in the recent quarter from accounting for one-time items, including fuel hedging and debt refinancing. Revenue generated by the Tempe, Ariz., airline operator rose to $1.91 billion from $1.81 billion, up 5.2%.

U.S. Airways also said its second quarter and full year would show a profit, including accounting for $300 million in added fuel costs.

Alaska Air's
ALK, -2.12%
first-quarter loss narrowed to $10.3 million, or 26 cents a share, from $79.1 million, or $2.36, in the year-earlier period. A year ago, Alaska Air recorded a charge of $2.44 a share for costs of its transition to an all-Boeing 737 fleet.

Seattle-based Alaska Air's revenue rose 3.2%, reaching $759.4 million from $735.4 million. Analysts polled by Thomson Financial had forecast, on average, a loss of 32 cents a share and revenue of $767.9 million.

Also on the move, shares of Midwest Air Group Inc.
MEH, +0.57%
rose 1.8% to $14.03 after it reported a first-quarter profit, boosted by greater passenger traffic.

On Wednesday, a federal bankruptcy judge gave final approval to Delta Air Lines Inc.'s plan to exit bankruptcy proceedings, clearing the way for the nation's No. 3 domestic carrier by passengers carried to resume trading next month on the New York Stock Exchange. See full story.

Northwest Airlines Corp.,
NWACQ
expected to emerge from Chapter 11 protection from creditors later in 2007, and its flight attendants union reached a tentative agreement Thursday that the union said would preserve its $182 million bankruptcy claim against the airline.

A Northwest spokesman said the deal, if approved, would satisfy the carrier's requirement for $195 million in annual cost savings. The Association of Flight Attendants said the claim could yield about $15,000 to $18,000 per flight attendant. The tentative agreement will next be submitted to the flight attendants' Master Executive Council, which will then decide whether to send it union members for ratification

In brokerage moves, Credit Suisse raised its target price on UAL to $56 from $55, noting the company's plans to cut back on United Airlines' capacity in the second half of 2007. Analysts at Goldman Sachs downgraded UAL shares to neutral and removed them from the brokerage's conviction list.

Crude futures fell Thursday after Iran said it was approaching a "united view" with the European Union on resolving tensions surrounding the country's nuclear program. See full story.

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